Gauging the living wage

Published 4:00 am, Sunday, April 4, 1999

1999-04-04 04:00:00 PDT SAN FRANCISCO -- With city contracts accounting for a third of her billings, small business owners like Kim King figure they'll be priced out of doing business with San Francisco if a "living wage" proposal boosting wages to as much as $14.50 an hour is passed.

Under the plan, which is currently a draft submitted to the Board of Supervisors for consideration, King estimates the payroll costs, plus the associated taxes and insurance, for her security firm would increase by 57 percent. With payroll being 70 percent of her business expenses, she says the hike, amounting to an average of $5 an hour over her current wages, could be devastating.

"I would love to pay my employees that much money . . . but if that happens, I would go out of business," said King, whose company, King Security Services Inc., provides security for Muni. "I'll have to sit down and really analyze whether it's worth doing business with The City."

Although no formal legislation has been introduced, San Francisco is considering imposing the highest hourly wage with the broadest reaching effects of any of the 28 existing living wage ordinances in the nation. A proposal, submitted last fall by a group of religious and labor groups called the Living Wage Coalition, is already causing jitters among San Francisco's business owners and even its nonprofit organizations.

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Most living wage ordinances apply to contractors who provide services to the city or county, most using thresholds such as $25,000 for service contracts. San Francisco's ordinance, if passed, would cast an even wider net, requiring compliance from recipients of financial aid such as grants and tax abatements. The ordinance will not apply to any existing union contracts.

San Francisco Supervisor and Board President Tom Ammiano, who has made the living wage ordinance his top legislative priority, said he has been conferring with the city attorney over the scope of the law and plans to introduce it sometime this month. Mayor Willie Brown has promised to sign whatever measure the supervisors send him.

The Living Wage Coalition estimates the minimum livable wage for a single parent in San Francisco is $13 an hour with benefits and $14.50 without, based on Association of Bay Area Government research. In contrast, Oakland's existing ordinance sets wages at $9.25 an hour and San Jose requires $10.75.

Only Marin County is considering an even higher living wage, one at $14 an hour with benefits and $15.25 without. Like San Francisco, that proposal is in the draft phase and has not been introduced formally.

Under San Francisco's present proposal, a worker clocking 40 hours a week would make $30,160 a year earning $14.50 an hour and $27,040 a year at an hourly wage of $13. According to San Francisco's controller's office, about 105 of The City's 26,000 workers earn less than $26,000.

For example, a police cadet earns $22,080 to $26,674, a mental health rehabilitation worker makes $21,767 to $26,309 and locker room attendants for city swimming pools are paid $20,619 to $24,899. Those figures do not include benefits, which are provided to all city employees except temporary or provisional workers, such as those who have not yet passed the civil service exam.

Thousands more affected&lt;

Partly because of its unusual status as a city and a county, San Francisco's law may affect thousands more workers than any of the other, predominantly city ordinances.

For example, nonprofit organizations that provide health and other social services to the city and county fall under the law. That puts the nonprofits in a difficult position.

"Nobody's against paying a living wage - especially in the nonprofit community," said Jim Illig of Project Open Hand, a nonprofit organization that provides food for HIV-positive people.

Illig, who is also chairman of the Board of Supervisors-appointed living wage task force, a group charged with reviewing proposed living wage laws and making recommendations to the supervisors, said nonprofits, some of whom rely on county contracts for 90 percent of their work, would have to cut jobs or services without increased funding sources.

In the 1997-1998 fiscal year, the City and County of San Francisco contracted with 450 to 600 nonprofits to provide various services, according to the Administrative Services Department.

In addition, San Francisco is considering applying the law not just to companies with service contracts, but those with purchasing agreements - meaning, companies, even those based outside San Francisco, with contracts to provide goods to The City or county. No other living wage ordinance in the country applies to purchasing. It also may impose the requirements on businesses that receive tax credits, lease land or are located in redevelopment zones.

Concerns at Beach Chalet&lt;

That means businesses like the Beach Chalet Brewery & Restaurant, a former Veterans of Foreign Wars bar and meeting hall located in Golden Gate Park, could fall under the ordinance as well as businesses at Pier 39, which is leased from the Port of San Francisco.

The Beach Chalet's president, Greg Truppelli, said the restaurant may lease property from the City and County of San Francisco, but it is treated like any other property and he does not receive any special credits.

Truppelli said his main concern is whether tips will be factored into wage valuation. "Servers really don't make money on the minimum wage. They make money on tips," said Truppelli, who estimates that about 60 percent of his 150 employees earn California's minimum wage of $5.75 an hour as a base salary. "This (the ordinance) has the potential of putting our business out of business."

Reactions from most small business owners range from those who support the concept but not the dollar figure to those who don't want local government to interfere in how much they pay their workers.

"What mandate does a municipal institution have over small business?" said Michael Penn, executive director of San Francisco's Black Chamber of Commerce. "We're trying to help our own people by hiring them, just giving them a job. . . . If you look at it from a perceptive of minority or black-owned business, you are already struggling just to stay in business."

King, of King Security, who serves on the living wage task force, said she agrees with the idea of the ordinance but objects to the hourly rates on the table.

Scott Hauge, head of the Small Business Network, a coalition of 21 small business groups, said raising the minimum wage would push up all rates. For example, he said, a longtime worker earning $15 an hour would likely demand a raise if a new hire was brought in at $14.50.

Living wage fans unmoved&lt;

Proponents of the living wage are unswayed by small business owners' claims that such an ordinance would drive them out of existence.

"Anytime there's any discussion about raising the minimum wage, there's the same type of rhetoric. "We're going out of business, we're going to lose jobs, we'll leave San Francisco,' " said Barry Hermanson, co-chairman of the Living Wage Coalition and owner of Hermanson's Temporary Employment Services. He contends other municipalities that enacted wage ordinances didn't fall apart.

Hermanson, a small business owner himself, admits he has no contracts with the City and County of San Francisco because he says the paperwork makes the business not worth the hassle. But he says he's passionate about the issue because he believes the socioeconomic cost of low-paying jobs may be greater than people realize.

People who earn minimum wage often have to rely on public assistance just to survive, Hermanson said. "When someone's being paid the minimum wage, I have to end up, as a taxpayer, paying for their housing, food, health care. Is that fair?" he asked.

Hermanson said San Francisco's ordinance should apply to purchasing agreements because he believes The City should not buy goods from companies that fail to pay their employees a living wage. He likened the case to buying cheap garments manufactured under sweatshop conditions.

Josie Mooney, president of the San Francisco Labor Council and head of the Service Employees Internation Union Local 790, acknowledges that the ordinance may be watered down by the time it is introduced. But she supports The City taking a broad approach: "San Francisco leads the way on a lot of issues, so why not this?"

National living wage advocates and opponents are closely following San Francisco's debate because discussions include areas not covered by any other city or county ordinance.

Hurting vs. helping&lt;

Jim Doyle, spokesman for the Washington, D.C.-based Employment Policies Institute, argues that living wage mandates end up hurting the very people they intend to help.

"Everyone has to recognize there are some people who just don't have the skills to be earning $13 an hour - people who are illiterate, have substance abuse problems," said Doyle, adding that welfare reform also has eliminated a "safety net" for the poor. He said that particular population of people needs to have low-paying jobs available or they won't have any jobs at all.

Doyle contends the living wage effort affecting city and county contracts is part of a national labor-backed campaign to ultimately increase state and federal wage limits.

Mark Weisbrot of The Preamble Center for Public Policy dismisses Doyle's group as being "right wing" and

"hysterical." "The idea behind this (living wage) is that cities shouldn't be in the business of creating poverty," said Weisbrot, research director for the Washington D.C.-based group.

As for claims that living wage ordinances end up costing cities dearly, Weisbrot points to a 1996 study he and his group did of the nation's first living wage ordinance, enacted in Baltimore in 1994, which showed the dollar bid per city contract actually fell due to competitive pressures. Doyle's group has accused the study of being fabricated, with missing data and incorrect analysis.

Without knowing how many contracts San Francisco's ordinance will encompass, it's difficult to estimate the number of workers who will be affected and how much the ordinance will increase The City's expenses.

In essence, that number would include anyone with service or purchasing agreements with the City and County of San Francisco.

According to Purchasing Department figures, The City has 197 purchasing contracts with 242 vendors. That number does not include contracts under $5,000 or anything dealing with construction. The City and County was unable to provide information on how many service contracts it has.

However the ordinance is structured, San Francisco's small businesses remain wary.

Cliff Waldeck, owner of Waldeck Office Supplies, said his eagerness to one day be awarded a contract with San Francisco would disintegrate if an ordinance passes mandating that he pay his clerks well above his current $8 hourly rate.

"The first rule of thumb in the office supply business is you have to match Office Depot's prices," said Waldeck, referring to a national chain. "If I had to pay everyone $13, $14 an hour, I would not go out of business. I just wouldn't do business with the City of San Francisco." &lt;

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